New “Dispute Avoidance Mechanism” Extended to Power Sector Projects


The Ministry of Power (MoP) has announced the extension of the “Dispute Avoidance Mechanism” through the appointment of an “Independent Engineer.” An Office Memorandum to this effect was issued on 18th October, 2023.

It may be recalled that MoP had previously introduced this mechanism for resolution of the contractual disputes in hydroelectric projects. It covered those hydroelectric projects that were executed by Central Public Sector Undertakings (CPSUs) under the Ministry of Power. This mechanism was introduced through an Office Memorandum (OM) dated 21.09.2027.

This innovative approach, facilitated by Independent Engineers, has played a pivotal role in mitigating time and cost overruns in these hydro projects by resolving disputes at the inception stage. MoP has observed that the mechanism has been widely successful in resolving disputes in hydroelectric projects under the Ministry’s control.

Recognizing the effectiveness of this mechanism, there has been a growing demand to extend its application to other power sector projects. In response, the MoP, following the principles set forth in its previous OM dated 27.09.2021, has officially extended the “Dispute Avoidance Mechanism” through the “Independent Engineer” to all power sector projects managed by CPSUs under the administrative control of the Ministry of Power.

The Standard Operating Procedure and Terms and Conditions for payment to the “Independent Engineer” will remain consistent with those outlined in the previous OM dated 27.09.2021.

Furthermore, the Ministry of Power will establish a panel of Independent Engineers with expertise in the thermal and transmission sectors. This panel will be notified in due course, ensuring that these experts are readily available to assist in the resolution of disputes in power sector projects.

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